Sunday, December 28, 2008

The Trading RM Oscillator has continued to decrease in value and has continued to slope down.  The Trading RM Oscialltor value of 29.33 has not been seen since the last week of September.  (However at that point in the year the Oscillator crossed through 29.33 on an upward slope.)  This is a function of the holiday trading and the declining volatility in the market.  We will continue to try and trade less, be more selective, and manage our losers carefully.  When we see the Oscialltor slope up we will know it is time to get aggressive and trade more. 

Thursday, December 18, 2008

Trading RM tracks the number of "waves" in the SPX every day, week, and month.  I looked up some stats for what we define as "waves."  Being shorter term option traders I am curious as to how this expiration is shaping up as compared to the most recent expirations.  from this I can gauge my expectations for PnL, # of trades, and aggressiveness against how I did previously. Here is a brief table with the stats (# of "waves" per day):

Day                                                              September          October         November           December  
Wednesday before expiration Friday         38                          48                    38                         19
Thursday before expiration Friday              58                          97                    67                         18
expiration Friday                                             30                          62                    66                           ?

Wednesday, December 17, 2008

Range Bound Trading 12/17/08

What signs have we seen at Trading RM that we are in a range bound market?:

  • When I feel like adding to my longs or shorts they stop working.  That feeling of adding and pushing was correct in September and October.

  • The Trading RM Oscialltor is sloping down.  (see below post)

  • Increasing frustration on our trading desk

  • The SPX has been honoring several levels on upside and downside.  One of several charts that show this is posted.  920 on the SPX seems to be a top of one range.  Any longs in front of 920 this afternoon around 1:30pm cst were hurt on the afternoon mini sell off. 

What lessons can we take away ...for those of us who are still trading towards the end of 2008ar?:

  • Book profits when you have them

  • Less positions

  • Be Active - sitting in a long or short for a long time is not working.  When the market sells off the strongest names are going down the most and vice versa.   Today we saw several REIT names drift up, pick up a little acccelration, then sell off sharply.  Below is the REIT etf, IYR.  Depending where you got in the up move was quickly erased.   Pick a REIT name they all looked the same today (URE, SPG, VNO, BXP, FRT, etc...)


Trading RM Oscillator

What follows is an introduction to the Trading RM Oscillator. 

Trading RM developed and uses the oscillator to tell us when trading is "good" and when it is slower/ "bad."  In a perfect world we trade more and more aggressively when the oscillator is high and/or trending up.  Likewise when it is trending down/or at a historically low level we trade less and less aggressively. 

We will be posting the Oscillator with commentary on what we are seeing at the beginning of every week. 

December has shown less opportunities for us than September and October.  The slope of our Oscillator and the upcoming holiday period confirms this.  It may be a good time to think about winding down for 2008 and to look forward to 2009 trading.